← Back to the blog
Imports and Exports: 5 Reasons It’s OK to Do Both
In the crude oil export conversation, some have raised the question about the timing of the debate and why Congress and the President should consider repealing the ban when the United States currently imports roughly seven million barrels of crude oil each day. It’s a question that is built on a false premise; allow us to explain.
- At its core, the argument that we shouldn’t be exporting crude so long as we continue to import crude is founded on the mistaken notion that all crude oil is the same. In reality, many different varieties and grades of crude oil exist – ultra-light, light, medium, heavy, sweet, and sour – and refineries are built and configured to refine specific formulations of these grades, based on the specific equipment and processes in use at the facility. In other words: not all crude is created equally. And neither are all refineries. Heavy crudes (oil with higher density) can’t be swapped for lighter grades without significant capital investment to modify refinery processing units or running the refinery in an inefficient manner. Both of these scenarios would require steep crude price discounts (i.e. the domestic crude price would have to be significantly lower than the international price, also known as the WTI/Brent spread), which would make crude oil less economic to produce.
- The suggestion that we should not export crude oil while we still import some from abroad (even as imports continue to decline) runs counter to longstanding U.S. economic policy and free markets. For example, in 2014 the U.S. exported over one billion barrels of refined petroleum products, while importing 230 million barrels. The U.S. is also the world’s leading producer and exporter of corn, yet in 2014, we still imported 635,000 metric tons. Consider the following from the Massachusetts Institute of Technology, which outlines the various products that the United States both imports and exports, including cars, refined petroleum products, computers, metals and airplane parts:
(click the graphic, it’s interactive)
- The United States is producing more light oil today than at any point in recent history. Over the past few years, the U.S. has virtually eliminated the importation of light oil, as shown in the chart below. These light oil imports were displaced by light oil produced domestically, mostly from shale formations. This “turning of the tables” was a driving force in reducing the nation’s “petroleum deficit” in 2014 (the portion of the trade deficit attributed to crude oil and petroleum products).
- Energy Information Administration (EIA): “The increase in U.S. shale and tight crude oil production has resulted in a decrease of crude oil imports to the U.S. Gulf Coast area, particularly for light-sweet and light-sour crude oils […] Historically, Gulf Coast refineries have imported as much as 1.3 million barrels per day (bbl/d) of light-sweet crude oil, more than any other region of the country. Beginning in 2010, improvements to the crude distribution system and sustained increases in production in the region (in the Permian and Eagle Ford basins) have significantly reduced light crude imports.”
- According to EIA, of the seven million barrels of crude oil that is imported into the United States each day, about 39 percent comes from Canada and 11 percent from Mexico—meaning half of our daily imports come from our closest neighbors and very secure and reliable allies. The remaining 50 percent (~3.5 million barrels) come from a handful of countries, including Venezuela, Brazil, Iraq, Saudi Arabia and Colombia, among others. These imports of medium and heavy crudes are destined for refineries in the Midwest and along the Gulf Coast which are specifically configured to process these grades. Importantly, these heavy imported barrels will not be “backed out” by growing U.S. light oil production.
- Bloomberg: “U.S. refiners built the capacity to use heavy crude, so this is the natural home for Latin American heavy oil,” said John Auers, executive vice president of the Dallas-based consulting company Turner Mason & Co. “Those barrels still belong here, while the light and medium crudes from the Middle East and Africa are the ones being backed out by domestic production.”
- Repealing the ban on crude exports would generate significant economic benefits for consumers and the overall economy, according to numerous independent analyses from think tanks, academia and government agencies. Importantly, should the ban on exports be repealed, the President of the United States would still retain authority to curtail or halt exports if deemed in the national interest.